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Saturday, June 25, 2016

The Minskys — The Job Guarantee: The Coolest Economic Policy You Never Heard Of

When you think of economic issues what are the first things that come to mind? Poverty, inequality, unemployment, inflation, and crisis are all common answers to the question. Wouldn’t it be great if there was a policy that could address all of those issues (and more) in a cost-effective manner? In this piece I will give a very brief introduction to Job Guarantee (JG) schemes, the proverbial economic silver bullet.…

20 comments:

Orthodox economic thought claims that millions of people need to be unemployed in order to contain inflation, that it is financially “sound” to a tenth of the population in idleness for an unknown period of time.

Oh, so not being a wage slave is idleness? Then are the retired idle? Are housewives and stay-at-home mothers idle?

What is needed are incomes and the ability to do meaningful work, not being paid to waste time lest one depress* wage rates. What is needed is justice, not insulting, blame-the-victims "solutions" such as a JG.

Always. Justice is at the heart of the JG. The problem is that the concept of justice has not gotten a grasp on the minds of JG-opponents. A money-using society without a JG, without a way for its members to earn money - when - they - want - is ludicrously unjust, and this includes Andrew Anderson's proposals, which are therefore ludicrously unjust.

If they include a UBI, they are also absurdly inflationary = (maybe) everybody gets paid - in money that isn't worth anything. Pretend-justice, not real justice, which is impossible without a JG. Without a JG, true full employment, individuals don't have a real choice. Not being a wage-slave when you want to be a wage-slave = doing work for others in return for them working for you on your society's standard terms, not being able to participate in society's formal, money-organized division of labor - is irrational, destructive enforced idleness.

The idea that a JG is not meaningful work, is being paid to waste time is utterly irrational - a belief that is hanging in the air, not connected to anything, not thought about at all. In a world with a JG, the retired, housewives & stay at home mothers, like everyone else can earn money when they want, not when some "omniscient" faker decides to dole it out to them.

Hard to reason people out of beliefs they haven't been reasoned into. The observation that the JG is necessary for justice works in any money-using society, including yours - it has nothing to do with "government-subsidized private credit creation" - which can be made illegal.

It still shows that the JG is imperative for justice - in fact it is clearer then. If only the government's money is money, and there is no private credit, then a government which does not provide a way for citizens to get money by doing productive things is insane. The JG is the restitution for people being forced to live in an Andrew Anderson not-paradise, robbed of their right to participate in society's formal economy when they want to.

The not-paradise is is either asking citizens for something they do not have until the goverment gives it to them (a depression, unemployment) - or giving them this "thing", money for them doing nothing. It then makes it without value, creating massive inflation by playacting at having a money-economy, not having a real one, where the public & the private sector do real things for each other and use money / credit to do the accounting, to measure what they are doing for each other.

It is fundamental to Marx's outlook that treating wage labor as a commodity like other commodities is a form of slavery in that it involves unpaid labor owing to the creation of surplus value that is economic rent extracted as "profit" or "capital share." Kalecki iterates this in tPolitical Aspects of Full Employment.

Neoclassical economics was developed largely as a counter to Marx's view of the relation of capital and labor, and Henry George's analysis of land rent. Neoclassical economics is rent-free and marginal productivity ensures that everyone receives just deserts. Land gets neatly folded into capital as productive. Unemployment? Unemployment is voluntary in that workers can always find employment by making their wage demand more "flexible."

This can be addressed in several ways.

One is obviously to eliminate wage labor but that involves a completely different system. BTW, socialism did not fail. Certain attempts at implement it did, largely owing to corruption.

The other way is to modify the system in order to balance capital share and labor share by eliminating rent. That is difficult to achieve under the existing system. Not only would the system have to be changed but also the economics and both are firmly entrenched in the power structure.

The most practical way to address the issue under the present system is to increase the bargaining power of labor, and the most powerful way to do this is create a buffer stock of employed by means of an ELR that replaces the buffer stock of unemployed, which Marx called the "reserve army of labor" that faces destitution if it refuses employers' offers by being "wage inflexible." And as we know from Keynesian and Post Keynesian analysis, the issue is not wage flexibility anyway, but effective demand. But increasing effective demand doesn't not necessarily result in a job offer for all willing and able to work. A JG is needed for the residual involuntary unemployment.

The "iron law of wages" states that " real wages always tend, in the long run, toward the minimum wage necessary to sustain the life of the worker" — Wikipedia. The minimum wage in the US is below subsistence level in many places and welfare transfers act as a subsidy to employers that offer wages below subsistence level.

Sam Walton knew this:

On one hand, as Walton himself wrote in his 1992 autobiography, Sam Walton, Made in America, "See, no matter how you slice it in the retail business, payroll is one of the most crucial things you have to fight to maintain your profit margin. That was true then, and it is still true today."

What's more, according to Professor Nelson Lichtenstein, author of The Retail Revolution: How Wal-Mart Created a Brave New World of Business, "Sam Walton always said [...] 'I pay low wages, I can take advantage of that. We're going to be successful, but the basis is a very low-wage, low-benefit model of employment.'"

In short, Sam Walton firmly believed one of the most crucial aspects of maintaining Walmart's low prices was to keep wages -- at least for entry-level employees -- as low as possible.source

it has nothing to do with "government-subsidized private credit creation"

So when robots are doing all necessary labor then we shall still need a JG? When does leisure ever arrive? Or is leisure only for the few who own the robots?

- which can be made illegal.

I've seen nothing from JG proponents about eliminating government-subsidized private credit creation except Bill Mitchell would nationalize the banks - hardly an improvement if the Soviet Union is an example.

The most practical way to address the issue under the present system is to increase the bargaining power of labor, and the most powerful way to do this is create a buffer stock of employed by means of an ELR that replaces the buffer stock of unemployed, Tom Hickey

A UBI would achieve the same thing since working for others would then be an option, not a requirement.

Remember, people were driven off the commons to more easily make them wage slaves. People should again have an independent livelihood - not an alternative form of wage slavery.

A privilege for thee but not for me. Driving is a privilege that most people are able to attain, so it need not be called a guarantee. If you want to work, at a job that provides an income, you should be able to do so.

If you want to work, at a job that provides an income, you should be able to do so. Bob

No. Both the government and the private sector should be able to pick the most qualified and only the most qualified. We all benefit when they do and suffer when they don't.

Otoh, it can't be denied that the population has been systematically cheated so a UBI and/or asset redistribution is justified.

Work is undoubtedly good so the population should have the opportunity to do so but just as the population should not need to have jobs (work under bosses), neither should employers, including government, be forced to provide them.

- jobs that do not currently exist because they are not profitable. Bob

Because of lack of purchasing power in the right hands - the rich have too much and the poor too little - because of injustice. Rectify that and we shall have all the socially useful jobs the population desires and none they don't desire, eg. some mothers would rather raise their own children, surprise, surprise.

(would interest be included in that list-michael hudson always calls it a necessary precondition of production not a factor of production)

To be honest if the state(by which I mean Federal government) funds education,including tertiary with grant subsisdies,and fully subsidisies adult tertiary education with income support for adult student- then heavily invests in Research and development at firms and Universities and Public research Innovation development centres then that would effectively be a job guarantee and would also expand technological horizons and productivity and lead to an increase in living standards.A burgeoning private sector could then develop consumer products off the back of the state funded innovation.

Obviously this wouldn't just be in tech but in broader fields like agriculture and Planning.This would be the equivalent of a high income Job guarantee but the work (innovation)would exponentially expand the productivity of the economy.

This would involve the expansion of the state in the economy.

And yes if you tackle the economic rent thing properly we could possibly see a return to the days when a single low income worker could afford a great standard of living for her/his partner and offspring.

The less the economic rent, the need for a JG would not be as great if more benefits and grants were made available, but to eliminate involuntary unemployment in a market economy with wage labor, a JG would still be needed to mop up the residual.

A welfare state under a mixed economy would ideally have abundant social benefits guaranteed as right, and among them the right to employment.

Under a primitive economy or a socialist economy, no wage labor and no unemployment, so no problem.

The problem is getting from here to there and that involves increasing the bargaining power of wage labor in the labor market. Collective bargaining and a JG are key to that.